Acquisition to strengthen UOB’s retail banking operations
PETALING JAYA: RAM Ratings considers the proposed acquisition of Citibank Bhd’s consumer banking business by United Overseas Bank (M) Bhd (UOB Malaysia) to be credit positive.
The acquisition of the segment with a net asset value of approximately RM4.5 billion, as well as more than 1,000 Citibank employees, is expected to strengthen UOB Malaysia’s retail banking business and grow its position in the credit card market by loans from sixth to second, the rating agency said. in a report.
Besides Malaysia, subsidiaries of United Overseas Bank Ltd in Indonesia, Thailand and Vietnam have also entered into agreements to acquire Citigroup Inc’s consumer banking business in the respective countries.
The aggregate acquisition cost of $3.6 billion (about RM15.1 billion) was 1.2 times net assets, he said.
The agency pointed out that with total assets amounting to RM129.6 billion at the end of September 2021, UOB Malaysia is one of the largest locally incorporated foreign banks.
“After the acquisition, its existing loan base is expected to grow by approximately 15% while its retail customer base will grow by approximately 70% to 1.5 million.
“About 40% of the assets to be acquired are unsecured and primarily include Citibank’s large credit card operations, which complement UOB Malaysia’s mostly secure portfolio.”
Both banks’ retail banking businesses primarily target premium and mass customers, who generally have better credit profiles, he noted.
RAM said that while Citibank’s unsecured portfolio carries higher risk, he expects the impact on UOB Malaysia’s overall asset quality to be manageable.